Flagstar closes first RMBS securitization

by Francis Monfort02 Aug 2017
Flagstar has entered the residential mortgage-backed securities (RMBS) market in an effort to stay competitive with a more efficient way of selling jumbo mortgages.

The bank has closed a $444 million securitization of RMBS issued by Flagstar Mortgage Trust 2017-1. Supporting the certificates are 668 loans, of which 75% are jumbo prime and 25% are high-balance conforming. Loans originated through the retail, broker and correspondent channels of Flagstar comprise the pool.

The “high-quality” loans in the collateral pool are 30- and 15- year, fully amortizing high-balance conforming and jumbo fixed-rate Safe Harbor Qualified Mortgage loans. Flagstar said the borrowers have strong credit profiles and low leverage. On average, the FICO score of the pool loans is 771, with an original combined loan-to-value ratio of 63.5%.

"We believe that the RMBS program offers a more efficient way of selling jumbo mortgages into the market, which should help us competitively," said Alessandro DiNello, Flagstar president and CEO. "This competitive advantage should help us, especially with the recent acquisition of Opes Advisors and our continued efforts to recruit top-tier mortgage loan producers. I expect that over time, and if we're successful, we could expect to expand the RMBS program to other residential mortgage loan products."

In a July 31 ratings action, Fitch Ratings said the mortgages supporting the notes have an approximate total balance of $443.8 million as of the cut-off date.  Fitch also said that the high-quality mortgage pool, strong due-diligence results, and straightforward deal structure are positives for the transaction, but listed high geographic concentration, leakage from reviewer expenses, and extraordinary expense adjustment as concerns. The pool is primarily concentrated in California with about 60% of the mortgages, with 47.5% of the pool located in Los Angeles, San Francisco and San Jose. This contributed to a higher lifetime default expectation for the pool, according to Fitch.

Related stories:
Flagstar to acquire Opes Advisors
AIG enters securitization game


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